Control Your Spending

When was the last time you took a close look at your personal balance sheet? Do you have a very clear idea how much of your money is coming in each month and just as importantly, how much is going out? What is your monthly nut? How much does it cost you to run your life, all in, per month? How much is coming in each month? Mission one: if you earn a living wage and you consistently have more going out than coming in, it is time control your spending. Start with your bills and look for the least painful ways to shave some monthly expenses.

I don’t like subscriptions. Every month I have these bills that drive me crazy: $90 for the storage facility that I haven’t seen since I moved in a year ago, $220 a month for 300 channels that I rarely watch, Spotify, Netflix, Audible, Sirius/XM. The list seems endless. Add all this to the necessities like mortgage, auto, power and insurance, and it doesn’t take long for that monthly nut to get out of control.

Get your spending under control

When was the last time you took an inventory of your spending? If you cannot remember, chances are there are some things you are spending money on that you can either reduce or eliminate. Take the time to go through all of your monthly bills and credit card statements. Identify things you can reduce, eliminate, or negotiate.

Reduce

If you are going to Starbucks every day and spending $5-$10 on coffee, that can easily add up to hundreds of dollars per month. You can make it yourself for a fraction of that amount. If you’re going out for lunch, consider brown bagging it more often, while your at it, pay cash. If you get resourceful, you can probably shave hundreds of dollars from your monthly budget.

Eliminate

I was going through my American Express statement last month and I noticed a recurring charge for a science kit. Apparently my wife signed my daughter up for a service that delivers a science related learning toy each month. A few questions brought me to the realization that she rarely uses them. I cancelled the subscription. That’s $300 a year back in my pocket.

Negotiate

If a subscription based service realizes that you are leaving them for a competitor, you are in a good position to negotiate a better deal for yourself. Start with the areas where the greatest competition exists. Cable and satellite TV is a great example. People are cutting the cord in record numbers. Television providers will bend over backwards to keep you, they need to. I was paying over $200 for satellite television. I called the provider and told them I wanted to discontinue my service. By the time I hung up they had cut my bill in half. You can do this with phone service providers, internet (if you have competition in your area). Be aware of the agreements you have for equipment. A great question might be, “How much would it cost me if I cancelled your service today?” Just remember when your contract period is up, you are in the driver’s seat. Take advantage of it.

Put money away

Once you’ve gone through this exercise, take the amount you are saving (assuming you are covering your monthly nut) and consider using it first to eliminate all credit card balances. Once you’ve done this, start saving. Treat this savings as a bill that you pay each month. If you want even more discipline, payroll deduct that amount. It’s a great way to ensure that you stay diligent, and since you never see the money, it’s far less painful. As you are putting money away, earmark it for specific purposes: emergency fund, college, retirement, or future housing. Since there are tax advantages to certain types of savings, as you build wealth, you may consider hiring a trustworthy professional to manage it for you.

None of us can spend more than we make indefinitely. Understand your monthly nut and take this opportunity at year-end to control your spending by reigning in your expenses.